If you are a financial planner and you're staring retirement in the face, then the question of what to do with your clientele is a vital issue. Selling your practice can be a tricky business in some respects, and the hand-off to your buyer must be handled correctly in order to ensure a smooth transition.

A top concern is making sure you're selling your practice for what it’s really worth and not just what a buyer feels like paying you.

Here’s what you can do to get the best possible price for your company. (For more, see: Tips on Selling Your Financial Services Business.)

  • Capture the transfer of wealth. If your practice is full of older clients who have life insurance or other means of leaving a legacy to their heirs, get beneficiaries to open accounts with you before you sell. This can provide the buyer with a future source of revenue that can increase your sale price. Practices with older clients who will likely die out in the next few years will be worth less to potential buyers, as they will see a revenue stream that will dry up sooner rather than later.
  • Take your time. Waiting for the right buyer who will give you the right price makes a lot more sense than unloading your clientele at the first available opportunity (provided that circumstances are not forcing you to do that, of course). You may also be able to walk away with more money overall if you are willing to structure a payment plan out over a longer period of time.
  • Sell to one of your own employees. If you hired an assistant 10 years ago who is now ready to take over, then selling to him or her will probably be the easiest way for you to transition out of the business. This will eliminate the need to transfer client assets and introduce all of your clients to someone they don’t know. And the knowledge that they will eventually take over the business can also incentivize them to start making your practice more valuable today. (For related reading, see: Advisors Should Factor Clients Into Succession Plans.)
  • Sell your employees with your firm. Arranging for your employees to stay on under the new buyer can also help smooth the transition process. This, of course, may require that you structure a specific guarantee or plan into the transaction that ensures or entices your employees to stay. 
  • Invest in your current clientele. This is one of the most obvious ways that you can increase the value of your practice. Spending time with clients outside the office can help you to build deeper relationships and grow your business. Fishing, playing golf, watching sports and other leisure activities can cement your place in your clients’ lives and ensure a stable stream of future revenue from them.
  • Increase your line of products and services. If your clients all invest primarily in just a few vehicles, then expanding your repertoire of products and services can help you to capture more business and also make your practice more attractive. If your clients do a lot of retail trading, then consider offing income tax preparation services so that you can show them how to effectively harvest tax losses and reduce their taxable incomes with retirement plan contributions. If they own a small business, be sure to get a succession plan in place with their heirs so that they can easily take over when the time comes. Comprehensive financial planning can also help your clients to see the financial effects of long-term care expenses if they are not insured. Clients who take adequate measures to protect themselves from these costs will be more valuable to a potential buyer, as the chances of their assets going to a nursing home will be much lower. (For related reading, see: Retiring? How to Sell and Close Your Small Business.)
  • Raise your fees. If you charge fees in any capacity in your practice, then raising them will increase your future revenue stream without any additional input of time or effort. This is an especially good idea if you haven’t raised your rates in a long time but have increased the level of service that you provide to your clients. Also make sure that your revenue comes from several sources if possible; a practice that is not dependent upon the performance of just a few products or services will be more durable, which will make it more desirable for a buyer.
  • Fire your problem clients. If you have clients who are inordinately difficult to service or demand too much of your time for the revenue that they produce, then don’t hesitate to get rid of them before selling your practice. This may actually add to the value of your practice as it will streamline your client base and leave your buyer with an easier group of people to work with.

The Bottom Line

Selling your practice is one of the most important transactions you will ever complete. Take adequate steps to make sure that you get the best price possible for your clientele, and also make sure that both your employees and your clients are taken care of. (For related reading, see: Succession Planning for Your Small Business.)

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